Sustainability- PV costs

Since 2001 the cost of residential PV systems has declined from £10,000 per kWp to current costs of £2,000 per kWp and even below.  Several elements contribute to the cost of a PV installation and the most significant is the price of the PV modules. Other costs are taking into consideration such as inverters, fixings, wiring, installation (scaffolding and any modification to existing roof systems), overheads and contractor profit. The proportion each category contributes to the overall cost depends with the size of the installation and whether the building is new or retrofit, but generally 60 to 70% of the system cost is for technology with the remainder going on installation, overheads and profit.

Costs have reduced in all these categories as a result of:

•  Lower material costs, owing to the development of more efficient techniques for producing silicon wafers and therefore lower price modules

• Increased efficiencies in PV modules, resulting in greater outputs per m² of panel
• Significant growth in the scale of global manufacturing and distribution
• Significant growth in the UK market, producing greater economies in purchasing and a larger base of qualified installers
• Increased price competition among suppliers and installers

Beyond capital cost, the other factor impacting the return from PV investment is the level of incentive provided via Feed-in Tariff (FIT) and export tariff for each unit of energy generated. Installations will now be eligible for the inflation indexed tariff for 20 years, starting at one of three levels – the standard level, a reduced level for claimants with over 25 separate installations and a further reduced level for installations on properties that do not have an Energy Performance Certificate rating of at least D. From next month the tariff level will reduce each quarter by a default of 3.5%. The tariff degression may be increased up to a maximum of 28% or postponed (for up to two quarters) depending on the levels of PV deployment within each tariff band. The tariffs to be introduced in November to February 2013 are shown in table below.

However, good returns are still possible because capital costs and tariff levels are much lower than they were when the FIT was introduced. Within the cost range identified in the table below the range in Internal Rate of Return (IRR) achieved is between 0% and 12.5%. Similarly the cost of generation over the life of the technology can range from a highly competitive 8p to a less attractive 22p per kWh.

The continued investment in all aspects of the PV market will result in further reductions in cost through to 2020 and PV will be a cost competitive technology in much of Europe with generation costs of 5p/kWh or below. As UK and global PV markets continue to mature, this technology will become increasingly competitive as a low carbon energy source (Building Magazine, Oct12).

At Syntegra Consulting we are able to undertake PV / Solar Thermal design and Energy consultancy commissions throughout the UK & Europe.